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I Could Feel The Market Braking, It Was Also Breaking My Heart

A report from CNBC. “The dollar volume of homes purchased by foreign buyers from April 2018 through March 2019 dropped 36% from the previous year, according to the National Association of Realtors. ‘The magnitude of the decline is quite striking, implying less confidence in owning a property in the U.S.,’ said Lawrence Yun, NAR’s chief economist.”

“The Chinese were the leading buyers for the seventh consecutive year, purchasing an estimated $13.4 billion worth of residential property. Yet that was a 56% decline from the previous 12 months and comparatively the biggest percentage drop of all foreign buyers. Anecdotally, real estate agents in California have seen a pullback in Chinese buyer demand.”

From SocketSite in California. “The percentage of active listings in San Francisco which have undergone at least one price reduction has ticked up to 20 percent, which is two percentage points higher than at the same time last year.”

The Press Democrat in California. “When Paul Saharoff tried last year to sell his Santa Rosa home for almost $1 million, Sonoma County’s red-hot housing market already had started to cool. From late March to June 2018, Saharoff, 77, couldn’t get any buyers for the home he’d owned for 33 years. ‘I could feel the market braking,’ Saharoff said. ‘It was also breaking my heart.'”

“Finally, he’s set to close a deal to sell the 3,228-square-foot, four-bedroom house. Saharoff cut the asking price by about $75,000 to put the house within a buyer’s reach and was helped by lower mortgage interest rates.”

“At the halfway mark of 2019, the county housing market remains somewhat sluggish. The median single-family home price in June was $658,500, a sharp drop from the all-time record $700,000 median in June 2018 according to The Press Democrat’s latest monthly housing report compiled by Rick Laws of Compass real estate brokerage in Santa Rosa.”

From The Sun in California. “The Lake Arrowhead home of Andrew Ordon, co-host of the daytime talk show ‘The Doctors,’ is back on the market for $2.495 million. Ordon bought the property in 2010 for $1.3 million. He listed it in July 2018 for $2.999 million and dropped the price by $504,000 in May 2019.”

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This Post Has 80 Comments

  1. ‘‘The magnitude of the decline is quite striking, implying less confidence in owning a property in the U.S.’

    Eat yer crowz Diane.

    1. What do the media shills get out of it? I understand that Larry Yun gets a paycheck from the realtors and he would like to keep getting one so he tries to keep transactions going. Zillow and Redfin shills the same. Those are industry shills. But folks like Olick and Thornberg, are they literally getting paid by the REIC too? Or do they just really like going to the occasional realtor soiree? Do they get free fancy vacations at new developments or something?

      1. Diana is older now, and despite her RE experience she has to obey the editors, executives, etc., or she’ll be learning to write code.

  2. ‘I could feel the market braking…It was also breaking my heart’

    Yeah, Californians (whine country) will blabber all day and night about how terrible it is that shacks cost so much and think about the children! But generally they are greedy bashtards who refinanced and blew it all on drugs and cars.

    1. “… and blew it all on drugs and cars.”

      Yep. And any money that was left over was wasted.

    2. “whining Californians”
      unlike the never-ending sniveling revenge ebola/crow remarks.
      pot calling kettle.

      go figure

    1. What is amazing is that shack buyers can’t tell that the piece of this junk isn’t worth the price. You would think that something like a gut instinct would kick in and say, ” These timbers and land can’t be worth it.”

      1. Nobody cares what anything is “worth” any more. It only matters that someone else will pay more eventually. And if they resist the govt will make sure they do. Free money for everyone who catches the wave.

        2. “Nobody cares what anything is ‘worth’ any more. It only matters that someone else will pay more eventually.”

          This is the world of price equals value. In such a world wealth is created by increases in price. This price increase – this newly-created wealth – is something that can be “cashed out” and spent.
          It could be said that an entire economy in such a strange world could be based on such magic.

          1. It could be said that an entire economy in such a strange world could be based on such magic.

            It could be said. At least until the dollars being cashed out have no value or those who didn’t catch the wave start killing those who did en masse.

          2. And you can’t discount the psychological aspect of home ownership and how tightly it is ingrained in the notion of the American dream. You have millennials getting married, having children, and they want a baby room, a backyard, good schools. The fact that housing prices don’t make financial sense doesn’t align with their own personal timeline, so they just make irrational decisions that imperil themselves (e.g. Suzanne researched this).

          3. ^
            “And you can’t discount the psychological aspect of home ownership and how tightly it is ingrained in the notion of the American dream. You have millennials getting married, having children, and they want a baby room, a backyard, good schools.”

            We are going through this stage now and my wife is nearly murdering me even though she KNOWS the market is batshit right now (she is an economist). The urge to nest is STRONG.

          4. The urge to nest is STRONG.

            And the urge to do it the same way you did as a child (or better) is the strongest of all. Not compatible with cram downs.

          5. And you can’t discount the psychological aspect of home ownership and how tightly it is ingrained in the notion of the American dream.

            Indeed it is deep rooted in our culture. And along with home ownership comes more control over ones own circumstances.

            Look at my past situation – 50 years old, and told for the second time in as many years that my lease won’t be renewed and I have to find somewhere else to live. Besides the “I’m getting too old for this s**t” reaction being strong, there’s the feeling of “shouldn’t I be doing better than this/be the one who gets to make that decision this by now?” that goes with being told you have to move and it’s not your choice.

          6. 50 years old, and told for the second time

            If you’re like me, it didn’t help that I spent a lifetime collecting “stuff”. Moving a museum is hard work!

          7. 50 years old, and told for the second time in as many years that my lease won’t be renewed and I have to find somewhere else to live.

            One of the properties in our portfolio has appreciated about 120% in the past 8 years or so. I crunched the numbers and it was time to sell. The annual rent compared to what the sell price was just didn’t make sense. We would have to raise the rent to over $3k to make it work. The renter is in his 80s though and he just wants to die in that place. He doesn’t want to go shopping for another house. My father decided just to raise the rent a couple hundred (still well below market) and just left the guy stay.

          8. The renter is in his 80s though and he just wants to die in that place. He doesn’t want to go shopping for another house. My father decided just to raise the rent a couple hundred (still well below market) and just left the guy stay.

            That’s a pretty good example to illustrate the conundrum there of profits vs people. It gets more nuanced, because you may be falling behind in some way if you don’t realize those gains, and technically you owe nothing to that person (your rented), but .. well, it’s no fun to be in that position, on either side.

          9. and technically you owe nothing to that person (your rented)

            Yes, capitalism isn’t moral or immoral, it is amoral. There is a point where you just have to bite the bullet and do the hard thing. But if there is some wiggle room, I think it’s nice to be able to choose people. I think my father is getting to the end of his life and, though not religious, he’s probably thinking about people more than profits. Going soft in his old age.

        3. @BlueSkye,

          Indeed, I spent too much of my life collecting “stuff”, especially given how it pertained to my later career (8 & 16-bit computers and game consoles), but ever since my divorce, I’ve been have periodic waves of ‘getting rid’ of said stuff, as there is some money to be had in selling it off.

          I’m using this house as a guide for the latest wave of selling off things – we have a vision of a fairly uncluttered home, and about 3/4ths of the house has realized that. The last room will keep just a few key hobby items and most valued mementos (like a couple things autographed by Jobs and Woz) for myself and Mrs Spiffy. I think I realized about $2000 from last months sales effort (minus the ever growing chunk ebay and paypal take), which was only about 5 days I was actually working on it.

          The end goal we are using is “what if we had to downsize to a large RV/5th wheel?” and having stuff such that if we chose to do that, we could easily just make a single pass though and say “keep/get rid of” and be done with it. We’ve been getting better as time has gone on at seeing what we don’t use and finding a way to get rid of it.

          1. @MGSpiffy

            I listened to this amazing article on my drive today. It is a really amazing piece of journalism and it is a good critique of our consumerism and how weird life has become in the age of Amazon and RV-ers (e.g. America’s Roma).

            ROAD-TRIPPING WITH THE AMAZON NOMADS
            The Verge
            Josh Dzieza
            July 10, 2019

            “Chris Anderson moves through the Target clearance racks with cool efficiency, surveying the towers of Star Wars Lego sets and Incredibles action figures, sensing, as if by intuition, what would be profitable to sell on Amazon. Discontinued nail polish can be astonishingly lucrative, but not these colors. A dinosaur riding some sort of motorcycle? No way. But these Jurassic Park Jeeps look promising, and an Amazon app on his phone confirms that each could net a $6 profit after fees and shipping. He piles all 20 into his cart.”

            “It’s not a bad haul for a half-hour’s work, but it’s not great either. He consoles himself that he hit upon a trove of deeply discounted Kohl’s bras the day before as he left East Brunswick, New Jersey, on his way here to Edison. Home is still 300 miles away, in Tyrone, Pennsylvania, and there are plenty of stores between here and there.”

            “Anderson is an Amazon nomad, part of a small group of merchants who travel the backroads of America searching clearance aisles and dying chains for goods to sell on Amazon. Some live out of RVs and vans, moving from town to town, only stopping long enough to pick the stores clean and ship their wares to Amazon’s fulfillment centers.”

            https://www.theverge.com/2019/7/10/20687434/amazon-sellers-nomad-merchants-products-malls-walmart

          2. “…my wife is nearly murdering me even though she KNOWS the the market is batshit right now (she is an economist). The urge to nest is STRONG.”

            I would rephrase your comment to say, ‘the urge to buy at a market top, just before a 30 percent price decline, is STRONG.’

            Remind your wife that nesting is not tantamount to owning. All of our lovely children managed to survive to adulthood, despite the shame and horror of having been raised in a rental home.

      2. In a free market, homes or any product don’t have any inherent “worth.” They all have a value based on what price is set by the market. If you don’t like the market price, don’t pay it or wait for it to change. I agree that homes are highly priced in many markets, in large part resulting from manipulation of the free market, but please stop operating under the delusion there is some true “worth” to homes or “correct” price. That sort of thinking is what gets us the goofy regulations have created many of the pricing problems we face.

        1. I don’t view the housing market as a very much of a free market because, unlike widgets, the supply of housing is constrained somewhat by NIMBYism and the housing cartel of “haves” who have a vested interest in stopping development that would bring on more supply and push down their property’s value (e.g. we must protect the heirloom tomato plants from apartment complexes). Even though there is lots of land and cheap, it is not feasible to “drive ’till you qualify” for good job opportunities and the public services that make up what many consider to be a “good neighborhood”.

          1. I agree that it isn’t much of a free market. My point is there is no such thing as some kind of true, inherent value that is “correct.” There is a price that would be agreed upon in a “free market” with our without the non-market intervention. But there is no such thing as a true, inherent “worth” for homes that we will some day theoretically reach. You have pure market values on one extreme, outright price fixing by the government on the other extreme and everything in between. Yet none of those prices translate into some kind of actual, intrinsic value. No such thing exists.

          2. Yet none of those prices translate into some kind of actual, intrinsic value. No such thing exists.

            Yes, I would agree with that mostly. It is repeated often here, price is what you pay, value is what you get.

            The only point I would offer though is that once good gauge of price (and value) is to look at how many multiples of annualized rent it represents. You could also make the argument that replacement cost is useful (thought insufficient), but the rental yield is a decent tool in discerning value.

            But that just gets us back to the rigged market that is housing. Because if rents are inflated because of single-family-housing only zoning and NIMBYism, then price-to-rent be misleading too.

          2. Wrong. It can cost more to build a house than anyone is willing to pay. Construction cost is a factor that impacts market price, but doesn’t establish “worth”. As I said belowo, you can spend 10 million dollars to build a house in the middle of the desert. You think that house is “worth” 10 million dollars? Economic nonsense.

          3. You think that house is “worth” 10 million dollars? Economic nonsense.

            Sadly this is very true, especially at the high end. A relative of mine recently decided to list their multi-million dollar property. It is definitely one-of-a-kind and an award winning property. The problem though is that it is so specialized that it really doesn’t appeal to anyone other than the original buyer. The relative often says, “Well, you couldn’t build this house for X dollars!” While true, it doesn’t mean that the cost-to-build is remotely close to what the market for said house is. The cost-to-build is more relevant at the low end where housing is more utilitarian as basic shelter, but very irrelevant at the high end and even middle end where trends change every 5-10 years.

  4. For anyone who doubted that Powell was anything but a Globalist think about his testimony that we have a housing affordability problem because we cannot bring in enough immigrants to build new houses. Trump with his trade war with China and China’s subsequent restrictions on capital outflow has done more to make houses affordable than any of his solutions. The Fed created the problem. The problem is not the cost of labor without illegals but the cost of land due to Federal Reserve promoted speculation. More immigrants mean more demand for land. Immigration is aggravating the problem it is not the solution.

    1. This idea that worth doesn’t matter and it’s only price so catch the wave is so 1929.

      1. No one said price doesn’t matter. If there are reasons prices can be expected to go down, buying is risky. The point is there is no such thing as an inherent “worth” so yes, the “worth” doesn’t matter. You can spend ten million dollars building a palace in the middle of death valley, getting half price on all your materials. If no one wants to live there, that home isn’t worth 20 million, ten million or even two million. It’s worth only what someone will pay to plunder it for materials.

        1. When faulty and fraudulent lending is part of the reason a housing market inflates, your not talking about arms length transactions that equals a price justified.

          When your talking about the government backing faulty lending that adds demand , than it’s not a pure market..

          But also basic replacement cost, or a . cost basis appraisal would be closer to current value.

          If you have speculator demand it’s basically a false market . Take out all undue influences, including fraud, and you might get a market price , but low interest rates are also a market force that distorts true value.

          1. “If you have speculator demand it’s basically a false market.”

            Isn’t the rent or buy decision an individual’s speculation?

            FWIW, I’d like to see these large RE syndicates limited to multi-family apartment or condominium complexes, no access to the single family home market. I’m not sure if that’s realistic, but Wall street doesn’t give a schitt if a family has a roof over their heads.

  6. As you know I’ve been shopping …. I can’t tell you how many houses I see that when I go look at the history, I see market up 20-40% from just 3-4 years ago with no improvements or enhancements being done. Pure greed. It infuriates me.

  7. According to Dr. Drew, he in essence said that the homeless poop is being washed out to the ocean and polluting the sea.

    So I don’t know if this condition might put a decrease on costal property or not, but it should.

    On top of that the rat population has doubled because of homeless trash.

    2. My realtor is currently in Nashville trying to sell a home now that she’s decided against retiring there. It’s not going so well. She just ripped out the carpet to put in wood floors that buyers seem to want.

        1. Funny you post that. She complained about how “political” it is there. She’s probably only now noticing it because her views differ.

  9. “…Anecdotally, real estate agents in California have seen a pullback in Chinese buyer demand….”

    Money laundering comes with a price.

  10. Tesla gigafactory starts producing model 3s in China in November.

    Elsewhere, California is replacing 200 polluting diesel school buses with all-electric buses.

    And, Toyota (stubbornly clinging to the hope of fuel cells with its Mirai) just signed a deal with Chinese based CATL for EV batteries.

    I do agree with you ABQDan that it’s probably too late to turn the clock back on this EV “foolishness”.

    1. So are we suppose to buy Tesla’s because there made in the USA or because Elon is moving his base of operations to China? Also, I Said that lithium ion batteries were a dead end, I have not said that about fuel cell electric cars. So far they are impractically expensive. However, there are not the same problems with them if the price is brought down.

    2. Tesla just lost its autonomous driving technology to China what do you think is going to happen when it has operations in China?

      1. I just read that too. But from what was in the article it seemed like a lot of hyperbole. It may just be the work emails (with attachments) on the guy’s phone when he left the company.

        1. The Chinese loaned Elon the money to build in China. They now own anything he might think is special. The All American car, not so much.

      2. My wife’s Chevy Spark was make in Korea.

        Tesla will sell American-made model 3, S, X, and Y to north American and European customers. They will sell Chinese-made Teslas to Chinese. Yes, that employee did steal a lot of the source code. I expect China will compete in the auto industry just like the Japanese did, the Germans did, and the Koreans did. The Chinese will be ferocious, which is why DJT is right to go after intellectual property theft.

        But honestly, I haven’t seen NIO do that much yet. BYD has Buffet’s investment and Geely will do well. Tesla could compete in China. GM and Ford sales were down massively in China this past quarter.

    3. Toyota’s thing with BEVs is this – (to sum it up)

      If you have enough batteries with 210 miles of range – is it best to dump them in one vehicle or divide that up into 7 hybrids with 30 miles of BEV range? Since the avg daily commute for most is around 30ish miles -that is 7 vehicles removing emissions -vs- the one pure BEV (therefore wasting all those extra batteries).

      While everyone else is worried about “range anxiety” with BEVs, Toyota sees pure BEVs as a wasteful use of a resource (batteries). Wish I booked marked the story, it was an interesting read.

      2. ^This

        This is why partial hybrid electric vehicles (PHEV) are so crucial in the transition. This is exactly the kind of car that the Chevy Volt was. Most people’s daily commute is like 30-50 miles. So the Chevy Volt easily handles that even though the battery kilowatt hours is very small. But then you have gas for the 5% of the time where you travel to a different city and need it.

        I almost did buy a Volt when GM lopped off 20% when the discounted them earlier this year. Ultimately I decided to splurge for my Tesla model 3. I really do like not having to deal with oil changes and any engine maintenance. The lack of upkeep is why I went the more expensive route. But there are some good PHEVs out there.

  11. Tesla Model S Beats Chevy, Toyota, and Cadillac for Ultimate Car of the Year Honors
    Motor Trend
    July 10, 2019

    “The selection and judging criteria have changed, the trophies have changed, and the vehicles most certainly have changed, but the spirit behind the Car of the Year is the same today as it was in 1949: Identify the most superlative new vehicle introduced each year.”

    “We are confident that, were we to summon all the judges and staff of the past 70 years, we would come to a rapid consensus: No vehicle we’ve awarded, be it Car of the Year, Import Car of the Year, SUV of the Year, or Truck of the Year, can equal the impact, performance, and engineering excellence that is our Ultimate Car of the Year winner, the 2013 Tesla Model S.”

    “The mere fact the Tesla Model S exists at all is a testament to innovation and entrepreneurship, the very qualities that once made the American automobile industry the largest, richest, and most powerful in the world,” we wrote. “That the 11 judges unanimously voted the first vehicle designed from the wheels up by a fledgling automaker the 2013 MotorTrend Car of the Year should be cause for celebration. America can still make things.”

    https://www.motortrend.com/news/2013-tesla-model-s-beats-chevy-toyota-cadillac-ultimate-car-of-the-year/

    1. Motor Trend is probably just some EV fanboy publication.

      “Ultimate” Car of the Year finalists:

      1996 Dodge Caravan
      2004 Toyota Prius
      1955 Chevrolet Bel Air
      1949 Cadillac Series 62 Sedanette
      1972 Citroen SM
      1968 Pontiac GTO
      1986 Mazda RX-7
      2013 Tesla Model S

      2. I think it’s a little premature to give it to the Tesla, I’d have voted for the Bel Air. But in 20 more years maybe I will change my mind if Tesla remains on the current trajectory.

  14. The guy owned the house for 30+ years but is heartbroken over a $70k reduction from $1million.

    Now in that time there certainly should have been very significant appreciation so around $930k sales price should net him $860k ÷/-. My guess is that his original price plus maintenance and improvements should result In substantial profit plus “free shelter” during that time.

    Something not being reported here. Could the heartbreak have something to do with borrowing up against the property and resulting few net proceeds at closing? I see this all the time in my woods. A house currently headed to foreclosure sale was purchased in mid 1990’s for about $400k. Big lot, average house, navigable waterfront location. Lender loan balance is about $770k. Value on county record is about $680.

    First, who was stupid enough to give these loans and secondly, why would people borrow up like this. Perhaps necessity of some kind through years, but I see this over and over and it’s a replay of 2007. Ain’t just subprime that takes a market down.

    1. The footstamping is very likely a result of the fact he has far more in it than he’s getting out of it.

      So it’s with “homeownership”. It’s always a loss performing honest math.

  15. Oh yes, Olick and others have strings that are being pulled by bosses. They have pretty much been reduced to the “shortage” narrative because past narratives do not hold credibility any more. Love to hear there words once the bottom falls apart. I guess will be the shortage of 2019 which burst the bubble rather than subprime ala 2007.

    Yep, run that one past the editor to see if we can publish. We can? Oh great, let’s run with it. Call Yun to see if he can comment the same for support. He will? OK, let’s run it in the next article. Were covered.

    CNBC has lost total credibility for real estate reporting.

  16. If recent gold/silver moves are any indication of consumer confidence, this will be eroding soon. Silver spot of 40 cents so far today and was up over 20 cents yesterday. These are very large moves. Have not checked in on gold prices, but Barrick, the largest gold miner is in a bull run to say the least. This despite some doubt about further rate cuts. That news would typically cut gold/silver pricing.

    Something going on.

    1. Another comment about worth of property.

      On Oct. 28,1929 the worth of stock was high. On Oct. 29,, 1929 the market crashed and true price discovery ensued following this mania. It was discovered that buying on margin combined with a mania rose the stock value beyond the fundamental worth of the stock.

      Real estate is a qualifying sale usually base on a long term loan needed. Potential rents put a cap on worth also if you view real estate as a business. Real cost of building is also a factor in worth.
      If prices go well over the inherent worth , your probably in a false market that due to crash.

      1. true price discovery ensued

        If only the Fed would have known then what we know now they could have prevented all that pain…

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